Cingulate Inc. — Q3 2022 Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2022. Cingulate is a pre-revenue biopharmaceutical company developing drug-delivery products, principally for ADHD. Its lead candidates are CTx-1301 and CTx-1302; CTx-2103 is in development for anxiety.
Financial performance and position
- Revenue and margins: No revenue has been generated, and the company reported no gross profit or operating margin.
- Q3 2022: Operating expenses were $4.0 million and net loss was $4.0 million, or $0.36 per share. R&D was $2.1 million and G&A was $1.8 million.
- Nine months 2022: Operating expenses were $13.0 million and net loss was $13.1 million, or $1.16 per share. R&D was $7.1 million and G&A was $6.0 million.
- Cash flow: For the first nine months, operating cash use was $11.7 million, investing cash use was $0.01 million, and financing provided $5.0 million. Cash and cash equivalents fell $6.7 million to $9.8 million.
- Balance sheet at September 30: Total assets were $15.4 million, current assets $11.8 million, total liabilities $7.0 million, and stockholders’ equity $8.4 million. Accumulated deficit was $64.8 million.
- Debt: A $5.0 million unsecured related-party note bears 15% annual interest. Principal and accrued interest are due August 8, 2025, subject to WFIA’s demand right beginning April 1, 2023; payment may be demanded 120 days after notice. Accrued interest was $104,839 at quarter-end.
Changes versus comparable periods
- Q3 net loss narrowed to $4.0 million from $15.3 million in Q3 2021; nine-month net loss narrowed to $13.1 million from $18.1 million.
- The comparison is materially affected by a one-time, noncash $12.7 million charge in 2021 related to modification of profits-interest units ($4.6 million in R&D and $8.1 million in G&A). Q3 2022 R&D and G&A were down 63% and 81%, respectively, year over year.
- Nine-month R&D was broadly flat year over year: higher clinical and manufacturing costs were largely offset by lower personnel expense, including the absence of the 2021 one-time charge.
- Operating cash use increased from $5.8 million in the first nine months of 2021 to $11.7 million in 2022. The company received $5.0 million of related-party debt financing in August 2022.
Outlook, risks, and notable items
- Management expected available cash to fund operations through the first quarter of 2023 and estimated approximately $23.5 million of additional capital would be needed to support filing the CTx-1301 NDA in the first half of 2024. The filing states substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance of the financial statements.
- CTx-1301: Management planned to start a Phase 3 adult dose-optimization study in December 2022; the fixed-dose pediatric/adolescent Phase 3 study was expected to begin in mid-2023, with results expected late 2023. The food-effect study was completed in October 2022, with results expected in December 2022. An NDA filing in the first half of 2024 was conditional on positive study results.
- The pediatric study’s timing shifted after operational resource issues at the prior manufacturing organization; the company selected Societal CDMO to manufacture CTx-1301 clinical, registration, and commercial batches. A five-year master services agreement was entered into on October 24, 2022.
- CTx-1302 Phase 1/2 bioavailability study was planned for the first half of 2024; CTx-2103 remained in formulation/program-planning work. The company was also evaluating licensing and collaboration opportunities.
- Key risks include reliance on additional financing, clinical and regulatory success, manufacturing execution, and potential dilution or restrictive terms from future financing. A related-party director-managed entity is the lender under the 15% note; the board determined the director was no longer independent due to the financing.
- The company accrued a loss contingency for an employment matter at the low end of management’s estimated loss range. It also accrued a $250,000 CTx-1301 Phase 3 licensing milestone deemed probable.
Important facts for investors to verify
- Cash runway and progress toward securing the estimated $23.5 million of additional capital.
- Whether CTx-1301 trial milestones, food-effect results, and the planned NDA timetable remain achievable.
- Manufacturing readiness and the terms or execution of the Societal CDMO agreement.
- WFIA note demand rights, interest accrual, and the related-party governance arrangements.
- Potential exposure and developments in the employment contingency and future licensing milestone obligations.
- Potential dilution: 4,999,998 common-stock purchase warrants and 881,112 stock options were excluded from diluted loss-per-share calculations as anti-dilutive.